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Market ‘Convexity’ Makes Stocks a Tough Short—Searching for Alpha for August 2012

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How many times will the central banks prop up the markets with action or verse?  As many times as it takes. 

We saw it on the last day of June, and we’ll see it again. The European Central Bank, the Fed and every other high-minded banker will do practically everything to keep the ball rolling up the hill. 

Corporate earnings are another plus. Two-thirds of the S&P 500 companies have beat estimates, but on less revenue. That’s because C-suite executives are still too timid to start re-hiring, thus keeping expenses down. But stocks have been snapped up in the past week nonetheless. 

And I expect this to continue on a short-term basis. The summer doldrums appear to be mostly over, and the market’s convexity—a characteristic that connotes more upside return than downside risk – indicates a rally that could drown the already water-treading short-sellers.